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Building a Growth Portfolio – Retirement

Post on: 16 Март, 2015 No Comment

Here are three investing strategies to target long-term growth in your portfolio while also seeking some level of protection against stock market volatility.

The gift of longer lives means that our nest eggs will need to be large enough to stretch across a retirement that can last 20 or even 30 years.

A growth portfolio aims to do just that—increase the value of your retirement savings. A growth-oriented investment allocation will generally favor stock funds, which have historically delivered higher returns than bonds over long periods of time. However, there’s a trade-off in that stocks have also tended to be more volatile, especially over shorter timeframes.

A Risk-managed Approach to Growth

There are a number of simple investing strategies to help build a retirement portfolio that aims to maximize the growth potential of stocks while reducing some of the volatility. Your mix will ultimately determine how much you’re paying for growth.

Broad diversification. Different markets tend to be influenced by different economic factors. Spreading your risk exposure across different investments increases the likelihood that if one segment declines, others may do better. Broadening your scope will also broaden your opportunities for growth. It’s important to remember that asset allocation and diversification strategies do not ensure a profit or protect against loss in falling markets.

As a growth investor, diversification should mean two things. First. you might complement your stock holdings with smaller investments in bonds and other assets, such as inflation-protected bonds, commodities or real estate. Second. within your stock allocation, you could diversify your holdings across countries, (including emerging markets), market capitalization (small-, mid-, and large-cap), and styles (value- or growth-oriented).

Risk-managed strategies. You can also look to stock funds that aim to reduce risk, such as those that focus on dividend-paying stocks, or growth strategies specifically constructed to offset volatility, while still positioned to capture a portion of the market’s upside.

Periodic rebalancing. It’s important to check your asset allocation at least once a year. Big market movements may have significantly increased your stock exposure and can leave you vulnerable to unintended risks.

Of course, a growth-oriented retirement portfolio isn’t right for everyone. If you’re getting close to retirement or hold a lot of risky investments elsewhere, you may want to take a more balanced approach or go more conservative by shifting your allocation more toward income. Talk to your advisor about the best fit for your circumstances.